The surprise loss sparked a panic that spread to other funds and eased only after the US government backstopped the entire money-fund industry. Money funds had been considered safe investments.

The SEC alleged the managers misled investors, regulators and the fund's trustees about their intent to shore up the portfolio as clients were fleeing.

After a four-week civil trial in the US District Court for the Southern District in Manhattan, a seven-member jury found the elder Bent, 75 years old, and his son, 46, not liable for fraud.

"We're very pleased," said Bent II. Bent Sr is ill with pneumonia and wasn't in court.

The decision was viewed as a setback for the SEC, which has struggled to win financial-crisis-related fraud cases. The regulator typically must prove executives acted with intent, which often is difficult, said Arthur Laby, a former SEC assistant general counsel and now a professor at Rutgers School of Law.

Katherine Strock, a 39-year-old juror, said the jury's decision was difficult. Two jury members pushed harder for claims of fraud against the Bents, she said, but in the end, "There wasn't quite enough evidence for recklessness."

"However," she added, "we felt it was clear there was a lot of negligence."

The jury found Bent II liable on one claim of negligence for his role in communicating with investors. Strock said jurors made the decision based on a statement about the Bents' intention to shore up the fund that was posted on the company's website after the Bents realised they couldn't support the fund.

Reserve Primary ran into trouble after investing heavily in Lehman Brothers debt securities. Lehman filed for bankruptcy protection in September 2008, making the securities virtually worthless.

The jury also found the fund's investment adviser, the Reserve Management Company, liable for two claims of fraud and one claim of negligence. The company's broker-dealer distribution arm was found liable for one claim of fraud.

Robert Khuzami, SEC director of enforcement, said in a statement: "Today's verdict of liability sends the message that fund executives cannot withhold from investors and trustees key information about their fund's vulnerability. This case, along with our actions against more than 100 other entities and individuals, demonstrates our continuing commitment to pursuing cases arising out of the financial crisis."

But the penalties, to be determined at a later hearing, are likely to be small. Bent II's penalty could run in the tens of thousands of dollars, said Adam Pritchard, a corporate and securities law professor at the University of Michigan Law School. A spokesman for the Bents said they are considering appealing the negligence decision.

Reserve Primary's penalty also is likely to be small, Pritchard said. The firm was wound down following the financial crisis, and fund investors have since received about 99 cents on the dollar. The fund still has $99m in assets.

"This sends the signal to other people that you can get away with doing pretty much anything you want," said Leon Frenkel, a former investor who put about $1m into Reserve Primary beginning in March 2007. "All of a sudden, money that was supposed to be available was not available," he said.

A lawsuit on behalf of investors seeking class-action status, filed in 2009, is moving forward, said John Browne, the lead lawyer for the plaintiffs.

The SEC has faced criticism for its failure to punish more people for alleged misdeeds during the financial crisis. In all, it has charged 117 people and firms in financial-crisis-related cases, with total penalties of $2.2bn, according to the SEC.

In 2010, Goldman Sachs Group paid $550m to settle claims that it misled investors in a collateralised debt obligation called Abacus 2007-AC1, one of the largest penalties in Wall Street history. This March, a federal judge ordered Brookstreet Securities to pay a maximum $10m penalty in case brought by the SEC, which said the company sold risky investments to seniors, retirees and others. That decision has been appealed, said a lawyer representing Brookstreet.

The Reserve Primary case was only the second crisis-era civil case that has gone to a jury verdict. In July, a federal jury cleared a former employee of Citigroup of any wrongdoing for his role in a $1bn mortgage-bond deal. A civil trial against former Goldman Sachs employee Fabrice Tourre, related to the Abacus case, is set to begin in July.

The Justice Department won its first financial crisis-era criminal prosecution against Wall Street in February, when two former Credit Suisse Group employees pleaded guilty to charges of conspiracy for inflating mortgage bond values in 2007 and 2008.

The Bents argued they couldn't have predicted the Lehman bankruptcy. The defendants said they tried but were unable to raise money to support the fund.

Bent Sr is widely considered to be the father of the money-market fund. Now he is largely retired, although he and his son operate a patent-licensing business out of their homes. Bent II works occasionally on a livestock farm in upstate New York.

-- by Kristen Grind and Julie Steinberg. Write to them at kristen.grind@dowjones.com and julie.steinberg@dowjones.com